FRANKFORT, Ky. (8/31/13) – The following is a Letter to the Editor submitted by Dr. William F. Smith, a Dermatologist in Hopkins County, KY.

The federal Prevailing Wage Law was established to protect local wages from the potential negative impact of the competitive bidding process used by the government to select contractors for public works projects. It was never intended, as some have claimed, to “level the playing field” between union and non-union contractors bidding for these contracts.

The Kentucky Prevailing Wage Law was adopted nine years after the federal law, and requires contractors to use the prevailing wage rates established by the Labor Cabinet for public works projects that exceed $250,000.

The Kentucky Labor Cabinet has been given the authority to implement this law, and has used this authority to impose prevailing wage rates that are based on union wages rather than those paid to the majority of workers in each region. The substitution of union wages for legitimate prevailing wages dramatically increases the cost of labor for all major public works projects, and is a direct violation of the existing Kentucky prevailing wage statutes.

The Kentucky legislature is aware of the prevailing wage debacle, having been appraised by a report prepared by the Legislative Research Commission (LRC) in 2001 titled “An Analysis of Kentucky’s Prevailing Wage Laws and Procedures.” In its report, the LRC concludes that the procedures used by the Labor Cabinet generate prevailing wage rates that are significantly higher than the wages paid to the majority of workers in each region.

KRS 337.505 defines “prevailing wage” as…

“The basic hourly rate paid or being paid subsequent to the commissioner’s most recent wage determination to the majority of laborers, workmen, and mechanics employed in each classification of construction upon reasonably comparable construction in the locale where the work is to be performed…”

Wage data is collected by the Labor Cabinet at voluntary public hearings, and prevailing wage rates are established when 51 percent of the participating contractors are paid the same wage. The majority of participants in these hearings are organized union workers, so the wage determinations consistently default to union wages, despite the fact that union workers comprise only a small minority of the work force.

There is no effort on the part of the Labor Cabinet to collect data that accurately reflects the “basic hourly rate being paid to the majority of laborers,” and there is little or no incentive for a non-union worker to participate in this process knowing that their wage data will not have an impact on the final prevailing wage determination. The default union wage rates are significantly higher than the wages paid to the majority of laborers in each locale, leading to inflated prevailing wage rates and higher construction costs for all public works projects.

Despite the profound ramifications of this report, no action has been taken by the legislature, perhaps due to the substantial political power wielded by labor union advocates, who have generated their own data suggesting that higher wages result in better workmanship and a safer work environment, ultimately saving taxpayers money.

Research by the LRC confirmed that higher prevailing wage rates increase the cost of public works projects, but could not confirm that higher wages led to better workmanship or a safer work environment.

Like all data generated by special interest groups, the data generated by labor union advocates is suspect, and should be interpreted with a high degree of scrutiny. It is extraordinarily unlikely that the general population benefits from paying significantly higher wages for public works projects, which in many cases exceeds the average annual household income in the area being served.

The Labor Cabinet is a heavily biased organization, with strong political ties to the labor movement and its unions. It is unacceptable for an organization completely lacking objectivity to have unchecked authority to determine and impose prevailing wage rates without giving equal representation to the taxpayers who fund these projects.

It is also critical to ensure that the prevailing wage rates established by the Labor Cabinet accurately reflect wages paid for work performed on compatible commercial construction projects.

While it is unlikely that the Kentucky prevailing wage law will be repealed in its entirety, the following steps should be taken to make the law more equitable:

• Balance the authority of the heavily biased Labor Cabinet with an organization whose primary role is to advocate for the taxpayer.

• Implement a system that accurately determines prevailing wage rates based upon the actual wages paid for labor in each region. In order to accomplish this goal, all general contractors involved in commercial construction projects should be required to submit annual wage data for their workers. The data collected from these contractors should be compiled and used in aggregate by the legislature to determine the prevailing wage rates for the following year.

• Wages paid to workers based upon the current prevailing wage scale should be excluded from this process to avoid perpetuating the current artificially inflated labor rates.

It is critical that this action be taken immediately to ensure that all future public works projects are constructed efficiently and in accordance with the expressed written intent of the existing prevailing wage statutes.

William Smith

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